Douglas Goldstein, CFP®, is an investment advisor, president of Profile Investments (www.profile-financial.com) and host of the personal financial radio show, Goldstein on Gelt. Buy his new book on Kindle: Building Wealth: Investing in Stocks. Securities are offered through Portfolio Resources Group, Inc., Member FINRA, SIPC, MSRB, SIFMA. Accounts carried by Pershing LLC., Member NYSE/SIPC, a subsidiary of The Bank of New York Mellon Corporation. He can be reached at doug@profile-financial.com. Follow Doug on Twitter: @DougGoldstein.

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Is Your Money Safe?

For children, keeping money safe often means nothing more than making sure their coins are iCredit: Image: Salvatore Vuono / FreeDigitalPhotos.netn a pocket without a hole, or their piggy bank remains out of reach of their younger siblings. However, as an adult your definition of “keeping money safe” must be more sophisticated. Keeping money safe is more than knowing where it is at all times; it entails developing a strategy to safeguard both the actual funds and the money’s real value, its purchasing power.

While hiding your money underneath a mattress may protect your fortune from unwelcome intruders in your house, it won’t protect your money from the risk of loss in a fire (or other catastrophe) and inflation. Not diversifying properly and investing your money in inappropriate investments can be just as devastating as losing your money through carelessness.

Inappropriate investments

Inappropriate investments can have the same net result as having a hole in your pocket: fiscal loss. If your money isn’t diversified in suitable investment vehicles, you could be headed for potential losses. Placing money in haphazard investments without an overall plan can have disastrous results. Even if you have looked closely into one particular investment, think twice before investing your entire fortune in a single investment vehicle.

If your investments aren’t well diversified, the results can be devastating. I’ve met people whose net worth dropped by tens of thousands in a single day when they refused to diversify their investments, and their favorite stock’s value plummeted. Perhaps the single biggest indicator of financial success is the amount and style of diversification of one’s portfolio. Take a hint from Mother Nature who trained squirrels to hide their acorns in various locations scattered across the lawn in preparation for a long winter.

Does it require good fortune to amass a large fortune?

Careful planning, perseverance, patience, and periodic monitoring are all necessary components in building wealth. Don’t rely on a guardian angel or lottery winnings to fund your retirement nest egg. Keeping your savings safe requires more than a bank vault. Hard work and careful planning are the building blocks to creating and maintaining a sound fiscal future.

To find out more about diversification, you might like to read this article.

Disclaimer: This article is for educational purposes and is not a substitute for investment advice that takes into account each individual’s special position and needs. Past performance is no guarantee of future returns.